Brexit: Deal or No Deal (European Union Committee Report)

Baroness Neville-Rolfe Excerpts

Tuesday 16th January 2018 Lords Chamber

[Baroness Neville-Rolfe (Con)]

My Lords, I am delighted to follow the noble Lord, Lord Bew. It was good to see him this afternoon when we took evidence on Irish border issues. He is right to emphasise today the problems of no deal for Ireland.

I congratulate the noble Lord, Lord Whitty, on leading the debate skilfully in the sudden absence of the noble Lord, Lord Jay. I record my thanks to the noble Lord, Lord Jay, for chairing the committee with such verve and success in the absence of my noble friend Lord Boswell, who smoothly returned to his post today. It is a real honour to sit on such an interesting committee at this pivotal time and to work alongside talented colleagues of all political persuasions, although we sometimes disagree. The timing was good, and the public hearings that the committee had with a wide range of organisations helped to air the issues on Brexit at a critical moment. In a small way, they helped to ensure a satisfactory outcome at the December Council. I am sorry to have missed some of today’s speeches, but the lively disagreements have been both enlightening and entertaining—a strange benefit of Brexit.

I shall comment on three areas. First, I shall comment on financial services, as I also sit on the EU sub-committee concerned. We know Brexit is awash with uncertainty, which means that financial institutions have to operate contingency plans and work up a worst-case scenario—a matter of good corporate governance. Indeed, my impression is that, being streetwise, the sector is already moving forward with post-Brexit arrangements. That is one of the reasons why we know that the number of jobs lost seems to be lower than originally feared. For financial services, Brexit is complex. As our report says, it is in everyone’s interests, especially in this sector, to have a standstill or a transition, as now seems to be envisaged. However, that should also be agreed soon if the enactment of unnecessary contingency plans is to be avoided. Time is short. It needs to be in a watertight form so that both sides have contractual continuity. This is vital in, for example, the ongoing payment of insurance claims.

The good news is that the EU 27 also appear to want a time-limited transition that changes as little as possible, so I am hopeful that this will be agreed soon and that the legal concerns outlined by the noble Lord, Lord Whitty, will prove to be groundless.

I am more concerned about the substantive negotiations on financial services. My main point is that it would be damaging if the whole industry—that is, the small and the large; the fintech and the conventional; banking, insurance and asset management right across the UK—found itself a permanent rule-taker from Brussels.

The big international banks are well ahead, with parallel arrangements being made in Berlin, Paris and Dublin, but the UK needs to be free to provide sensible arrangements and reporting requirements for those who are operating in the UK or in third-country markets only. We need good regulation: it is a strength valued by investors in London. We do not need bureaucratic suffocation of low-risk domestic firms and small innovative operations embracing the digital and AI revolution. They must not be faced with automatic EU rules after Brexit which the UK has had no part in setting. Those representing smaller firms in the financial sector, such as the New City Initiative, which came to see me last week, are vehement on this point.

My second point is that while I am keen to see a deal and to see one soon, a bad deal would be worse than no deal. On that, the Prime Minister has always been right, and I am with my noble friend Lord Cavendish of Furness. A bad deal would be a yoke of increasing discomfort around our neck for ever more. I agree with our report and most of our witnesses that no deal would be damaging, but that is why we must strengthen our negotiating position by being clear in our minds what no deal would look like. We must also spend the money that the Chancellor has set aside for contingency planning.

Finally, I was struck by the panic among the EU negotiators when it looked as if an interim agreement might not be reached in early December—thanks, I have to say, to the DUP. President Juncker and M Barnier began to talk turkey. Our tough stance created movement for the first time, but toughness is not the only thing that matters. My long experience of EU negotiation is that you have to develop deep, strong, silken personal relations with the other side, devoting days and nights to this, while being tough and resilient on the substance.

Our experience in December shows that our negotiating position is stronger than many think. I hope that the Minister, who has so much valuable EU experience, will go into bat accordingly and conclude a good deal which Parliament can agree.